Tuesday, June 12, 2012

Ever since Mitt Romney told a whopper last week about Barack Obama choosing to act on health care reform in 2009 despite believing that it would hurt the economy, there’s been another round of speculation about Obama’s choices in his first several months in office. Sean Trende has the latest, arguing that Obama’s big mistake was that he didn’t use incremental approaches. I can’t say I agree with that. And I’ve always believed that Obama had little choice on health care; both he and Democrats in Congress had campaigned hard on the issue, and dropping it or scaling it down – especially with action on climate and other issues unlikely – would have provoked a significant fight within the party (see too Ezra Klein’s views last week).
Where I do agree with Trende is that more could have been done – and that FDR’s Hundred Days was the place to look. The trick? Go bigger, not smaller.

Here’s my list for things I believe Barack Obama and Democrats in Congress might have been able to pass in the first two or three months of the administration, probably with little or no changes to the health care timetable. I’ll go from easiest to hardest.

1. Fill the Federal Reserve Board openings and aggressively appoint and get confirmation on executive branch positions. Both Obama and the Senate Democrats never treated any of that as very important. On the Fed, Obama could have replaced Ben Bernanke with someone more committed to economic growth, or he could have surrounded Bernanke with people who would be pushing for growth even if it risked inflation.

2. The Bush tax cuts. Obama and most Democrats had campaigned on extended the Bush-era rates for most people and ending them for upper-income taxpayers. I think it’s very likely that in January or February 2009 they would have had the votes to decouple the cuts by extending the rates for most taxpayers.

3. Lock in a conditional program of extended unemployment insurance benefits, triggered by unemployment rate (or other indicator), either permanently or at least several years into the future.

4. Set up a new program of automatic long-term cost-neutral transfers between the federal government and state and local governments, intended to send money out to the states during recessions and recover it during good times. Both this and the previous item would have had the effect of programming in additional stimulus if needed without having to return to Congress again and again.

5. The toughest one, and where I agree with Trende: Dodd-Frank. It would have been tough to get that one done rapidly, but : Obama could have pushed Congress to give up early recesses and increase the number of floor hours in the wake of the economic emergency.

Now, there’s no way to prove that any of this would have worked. However, all of it had long-term payoffs in terms of both economic performance and other policy goals. And Obama was very popular at that point, and it doesn’t strike me that any of these measures would have hurt that popularity.

Could they have done it? In terms of putting the policies together, the only one here that’s really complex is the banking bill. In the event, it moved through Congress quite slowly. But if it was at the front of the line (along with stimulus) at the beginning of the year, I suspect they could have got it done. The other question is whether the votes would have been there, but again I think it’s at least plausible, and perhaps likely, that the last few votes could have been found (remembering that Al Franken was not yet seated and Arlen Specter was still a Republican). Put it this way: I think that agenda is more plausible than the suggestion by some liberals that votes could have been found for a much bigger top-line number in the stimulus bill. It’s also possible that the state and local stabilizers bill and a long-term UI plan could have been included in the stimulus and actually lowered the top-line dollar amount, at least at the time, with the additional stimulus only triggered later.

(Some of this might have created budget rules problems, I believe, although I'm not really an expert at that level. Mostly, however, I'd say that if they had the votes, they needn't have worried about it).

Meanwhile, Obama could have pushed Congress to give up early recesses and increase the number of floor hours in the wake of the economic emergency. That kind of stuff is popular!

Oh, and while they were at it, they also could have permanently eliminated the statutory debt limit. That’s a tougher vote (and perhaps should have waited until they had 60 Senators), but it’s almost certainly in the Democrats’ interest to remove it, and especially when they had the large supermajority they should have been alert for that sort of possibility – and the White House and the leadership should have been pointing out to Members that even if it was a tough vote, better to get it over with long before the election.

Necessary caveat: it's (relatively) easy to do this three years down the road, and with a fair number of assumptions about what's possible. Even if everything I'm saying here is correct, I'm still not sure how harshly Obama, Nancy Pelosi, or Harry Reid should be judged for failing to achieve the optimal policy mix. I do think that there's no excuse at all for the Fed stuff. But for the rest, the new administration and Democrats in Congress were facing some pretty tough choices, and overall I think they handled it reasonably well -- certainly much better than Bill Clinton's team handled an easier set of choices in 1993.

Overall? The big disagreement I'd have with Trende, in particular, is that I think the key was focusing as much as possible on substantive economic recovery, and secondly on a legislative plan that anticipated more flexibility earlier than later, and less emphasis on how anything looked at the time (other than in how that affected passage).

11 comments:

That's all worthy stuff that would have been good. Decades from now, though, it's the failure to pass a climate change bill that will be remembered not any of this. That's where Obama and the Democrats should have gone bigger and should have found some creative way such as making cap-and-trade revenue neutral via matching income tax cuts to get that passed. Also reforming the Senate rules once it became clear (which it did almost immediately) that the GOP plan was to require 60 votes for anything to pass.

I just don't see the votes this time around. I'm not sure whether that's an indictment of the Democratic Party, the Republican Party, individual Dems and Republicans who should have acted differently, the political system, or democracy in general, but I'll stick to what I said pretty early on -- it needed to be the top agenda item to have a chance, and for lots of understandable historical and interest-related reasons it wasn't, and that was really that.

Now, given that, it's possible they could have handled it differently, and I'm fairly certain that Obama could have pushed harder for non-legislative stuff, but I really very much doubt there was any realistic chance of getting a significant bill through the 111th Congress.

You even could have paired some of these things together or added extraneous elements on to them, so that Ben Nelson, Joe Lieberman, etc. could shoot down some elements, get to feel like big men/women, but most of the important substantive stuff still would have passed.

Agreed, although what is the exact nature of the (presumably Republican) opposition to this?I mean if pressed they would offer broad platitudes about local communities knowing how to plan for their future better than bureaucrats in Washington. But is it actual rigid ideology that stands in the way here, or something else?

Well, if they're actually principled in their beliefs, and cynical in their politics, stabilizers let states NOT shrink in bad times. I would not be surprised if conservatives approach this like treating the deficit as "Reagan's revenge:" deficits lead to spending cuts more often than they lead to tax increases, so anything that reduces the frequency of deficits would lead to a decrease in decreases in spending.

So, it really and truly could be about cutting spending at some unknown point in the future.

However, that's only the GOP side. Why I don't expect it at all is it involves Congress sending out money for which no member can take credit. Thus, it has no champions.

"I think that agenda is more plausible than the suggestion by some liberals that votes could have been found for a much bigger top-line number in the stimulus bill."

I'm curious about this, not just because of the specific instance, but because I'd like to know more about how politicians think about numbers.

As far as I'm aware, nobody really has a worked-out theory of how big a stimulus bill should be. $900 billion sounds like a lot, and so does $1.3 trillion or $400 billion. So if you propose any one of those big numbers, it'll strike them the same as any other, and you'll get the same dynamic where the swing votes in the Senate want a centrist reputation and pare it down. All numbers ending in "illion" sound the same, right? Or if this is wrong, I'd really like to know how they figure out how much is too much.

@NS -- from the fact that stimulus opponents typically referred to it as a "trillion-dollar" bill or as "costing nearly a trillion dollars," I'ma guess a trillion is one of the thresholds at which minds boggle and hearts rebel.

I guess that makes the decision to go for almost a trillion look especially bad. I mean, if you're going to do something that gets called a "trillion-dollar stimulus", why not go for 1.4 trillion rather than 900 billion and get over 50% more impact?